Equipment Leasing vs. Loan
Equipment Leasing

Lease vs. Loan

Choosing the right financial product for your business needs is crucial in order to stay on budget. In this article, you will find the most important differences between a bank loan and a lease.

A loan is borrowing money to purchase a piece of equipment and pay back over time.

A lease is an agreement that allows you to use specific equipment for a period of time.

What is the difference between a loan and a lease?

LoanLease
Amount60-80% of the purchase price. Banks typically do not include additional costs, such as delivery, installation, software licenses, or sales tax.Up to 100% of the equipment price. Some leasing companies can also incorporate additional costs into your agreements.
RatesBanks rely on Prime Rate or other indexes when determining an individual rate for your business. Therefore, rates and payments can fluctuate during the term.Lessors determine a fixed rate upfront and offer equal payments month-to-month unless special provisions are included in the contract. That makes budgeting and cash flow management easier.
TermsBanks offer a selection of standard terms and tend to be less flexible when it comes to special requests.Equipment leasing agreements can be as short as 12 months and as long as 84 months. Sometimes, it is possible to request a balloon payment at the end to get lower monthly payments.
EquipmentIt is easy for banks to lend money for popular products such as cars, but much harder for the types of professional equipment they do not understand.Leasing companies specialize in working with industrial equipment. They understand your business and the equipment in use.
CollateralMost banks require additional collateral such as other owned vehicles, real estate, or accounts receivable.Only the piece of equipment being leased is required as collateral. Your other business assets are not involved.
ApplicationBanks take 2 to 3 weeks to review your file and make a decision.Typically, a decision can be made in just 1 business day.

Considering an equipment purchase?

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